- The pandemic is giving us a preview of the kind of disruptions that climate change will bring.
- But it also offers a chance to rebuild a cleaner, more sustainable world.
- Here's what we know and don't know about the energy transition, recognising that the pandemic clearly adds an additional layer of complexity.
The COVID-19 pandemic is a horrific global tragedy, with more than 188,000 lives already lost and many more likely to follow in the coming months. Alongside the human tragedies, the economic devastation rippling around the world is taking an enormous toll on the livelihoods and financial stability of hundreds of millions of people. Recovering from this catastrophe will take years. For countless families and businesses, life will never be the same again.
As terrifying and destructive as this global health crisis is, it is just a preview of the increasingly severe disruptions that climate change will bring. When we do begin to emerge from this pandemic, humanity has a unique opportunity to build a better world, creating more sustainable systems that will provide more resilience to communities around the world, and reduce the emissions that are driving climate change.
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Despite the increasingly clear benefits of clean energy systems, including reduced emissions and continuously falling costs, the pace of the global transition away from fossil fuel systems is still not clear. The uncertainty will significantly depend on how policy-makers around the world respond to the combined factors of the sudden pandemic shock and the underlying realities of the energy system. The Global Future Council on Energy explores both the knowns and unknowns of the energy transition from a fundamental structural perspective in our latest working paper, acknowledging that the current global health crisis clearly adds an additional layer of complexity.
One of the most certain facts of the energy transition is that we need it to happen as quickly as possible to avoid the most catastrophic effects of climate change. We also know generally what needs to happen to make the transition possible: combining radical efficiency with renewable energy to decarbonize electricity, electrifying almost everything, and using some variety of hydrogen and other technologies for everything else.
Of course, making this enormous shift in energy infrastructure will be challenging, but it will also be beneficial in the long run. As described in the report; “Those who would benefit from a transition vastly outnumber those who benefit from continuity. Eighty percent of people live in countries that import fossil fuels.” In fact, just 1% of the global workforce is employed by the fossil fuel industry, and most of the industry’s profits end up in the hands of a small number of fossil fuel exporters.
Another clear fact of the transition is the continuously falling costs of new energy technologies including solar, wind, batteries and electric vehicles (EVs). As lead report author Kingsmill Bond explains in a recent article on Carbon Tracker, “the cheapest source of electricity in almost every country in the world today is renewables. Electric vehicles are a cheaper way to run a transport system, and the sticker price of an EV is about to reach parity with that of traditional cars”. Along with falling costs in power generation and EV, new innovations in other sectors such as steel and cement can lead to increased production of these important global materials with ever-cheaper renewable electricity. As innovation, growth and jobs shifts to these new energy technologies, older fossil fuel capacity will more rapidly become stranded assets.
Finally, a third area of relative certainty related to the continuously falling costs of clean energy technologies is that peaks for existing fossil fuel technologies have already started. “As a result of the rapid cost falls, key renewable energy technologies are growing very rapidly on exponential growth curves known as S-curves, making it possible for them to supply incremental energy demand in specific sectors and countries.” Faced with this continuously cheaper competition, existing fossil fuel technologies are already seeing peaks – for example, fossil fuel consumption in Europe peaked in 2006. Likewise, global coal demand peaked in 2013 and global demand for internal combustion engine vehicles likely peaked in 2017, the same year that 49 countries saw their emissions begin to decline.
In contrast to the more clearly understood economic and technological realities of the energy transition, the less certain factors are largely related to policy. The Global Future Council on Energy's working paper describes how the response of governments, companies and societies to fundamental changes in the energy industry is difficult to forecast. Resistance to change may in fact slow the transition in certain geographies or sectors, while a more aggressive approach to change can accelerate it in other regions or industries. Ultimately, the speed of transition will depend on the courage shown by decision makers.
Another important unknown factor is when precisely the global peak for fossil fuel demand will occur, an uncertainty that is further amplified by the sudden pandemic crisis. As Kingsmill Bond described in his recent Carbon Tracker article: “Fossil fuel demand has collapsed and may never surpass the peaks of 2019. By the time the global economy recovers, all the growth may be met by renewable energy sources.”
As we have seen before, it is clear what happens when a sector near its structural peak hits a cyclical downturn; the timing of the peak is accelerated.
Finally, a third area of uncertainty focuses on the pace and scale of innovative technologies such as hydrogen or carbon capture. This type of innovation is closely related to some remaining uncertainty on how to fully decarbonize harder-to-abate sectors of the economy such as aviation, shipping, trucking, steel and cement. However, these endgame sectors do not need immediate solutions in order for the energy transition to begin.
With emissions sharply down in the last few months due to the impacts of the pandemic, we are also getting a clear view of what could be possible in a lower-emission energy system. It would provide many immediate health benefits such as reduced pollution, good jobs, and more reliable and resilient power for critical facilities like hospitals. As we recover from the pandemic crisis, it is essential that we build back better. We need to create a more resilient and sustainable clean energy system in order to reduce the risk of facing the catastrophic crises that climate change could bring.